Donald Trump won the US election on a promise to ‘make America great again’. Now he is in the Oval Office, he will actually have to make good on those promises. He will need to create new jobs and improve living standards for America’s ‘left-behind’ who turned out en masse to vote him in. Trump appears to believe that the quickest way to achieve this is by revamping and restructuring the US’s global economic relationships, particularly with China.
Inevitably, such an upheaval will cause geopolitical tensions and Britain must be careful not to get sucked into a vortex of trade warfare. However, if we play our cards right, the process could provide a fantastic global opportunity for the UK. Read more
Since Libya slipped into civil war in the summer of 2014, its politics have been characterised by byzantine complexity. The sheer number of local, regional and international actors involved makes a tangled web of animosities and alliances that has confounded casual observers and international negotiators alike. Among the panoply of local power brokers, however, Eastern Libyan strongman Khalifa Haftar has increasingly emerged as impossible to ignore. No national power-sharing solution can survive if it excludes him. Now, Haftar looks poised to support a Russian bid for the leading role in the future of the oil-rich and strategically-located Mediterranean state.
Once a key figure in the Qadhafi regime, the 73-year-old Haftar is currently head of the so-called Libyan National Army (LNA) – which, in reality, is a powerful militia aligned with one of the three governments currently struggling for control of the country. In a clear signal of Russian support, Haftar was invited aboard the Admiral Kuznetsov, the sole remaining aircraft carrier in the Russian fleet, as the vessel entered Libyan territorial waters this month. Treated as a head of state might be, Haftar reviewed the ship before going on to discuss counter-terrorism policy via video-link with Russia’s defence minister, Sergei Shoigu. Read more
The nature of environmental and natural resource security has changed dramatically since the 1990s. Over the last two decades, the global economy, geared towards exploiting natural resources to serve an exponentially growing population of consumers, has far exceeded the carrying capacity of the planet. The depth of the transformation has been so profound that it has pushed Earth into a new geological epoch, the Anthropocene. Indeed, scientists have identified planetary boundaries that it would be unwise to transgress, and we seem to be in the process of crossing many of them right now.
Over the past few years, the world economy has also been quietly undergoing a further, high-speed transformation driven by the fusion of digital, material science and biological innovations of the Fourth Industrial Revolution. The World Economic Forum has highlighted this transformational pathway as the fundamental shift that is driving the global economy today. How it will incorporate the value of ecosystems and the interconnectedness of human and natural processes will determine whether the global economy manages to reconcile itself with the planet’s finite resources or whether we will simply accelerate its impacts. Read more
By Ganeshan Wignaraja and Juzhong Zhuang*
Rising protectionist sentiment in the West and a dramatic decline in global trade since 2011 have led many to speculate that Asia’s era of export-led growth will end soon. This speculation is overdone. While the slowdown in trade does demand responses, Asia is well positioned to be a bulwark against protectionism. In fact, it can lead global trade in the years to come.
But, getting the responses right will require a clear understanding of the causes. Policy makers need to ask first what explains the export slowdown, and what this means for Asian economies. The story starts with the great recession in 2008, which left advanced countries stuck in low growth, low demand environments that have weighed heavily on Asia’s export-dominated economies. Read more
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Corporate borrowers in emerging markets are already facing higher debt service and capital repayment costs, due to the combined impact of dollar strength and rising benchmark US 10-year interest rates. In turn, this risks creating a vicious circle for growth. The latest data from the Bank for International Settlements (BIS) suggest the EMs’ dollar-denominated debt doubled to $3.2tn between 2009 and March 2016.
As the IMF has warned: “China urgently needs to tackle its corporate-debt problem before it becomes a major drag on growth.” Read more
In the second half of the last century, world populations sought peace and security as the background for economic growth and overall prosperity. The US was the major underwriter and supplier and became world leader.
In this 21st century, with the globalisation of trade, social habits and new technologies, world populations need infrastructure and connectivity to be able to achieve economic growth and prosperity. China seems to be emerging as the main underwriter and supplier, be it in Asia, with the creation of the Asia Infrastructure Investment Bank; Latin America, with massive investments in power transmission; or in Africa, where it has been the main developer, builder and financier of infrastructure assets, based primarily on bilateral government-to-government arrangements. Read more
By Paola Subacchi, Chatham House
The few weeks between the beginning of 2017 and the Chinese new year may be used by the Chinese monetary authorities to tweak some policies. The exchange rate is an area in desperate need of reform.
Will China finally embrace the market and let the renminbi float?
Despite the ambition to turn it into an international currency – i.e. a currency used to invoice and settle international trade, and to be held as an asset – the renminbi remains a currency with limited international demand. Read more
Last year, a combination of mass migration, the largest refugee crisis since World War II and stagnant living standards proved to be an explosive cocktail for political elites in Europe and the US.
In 2017, middle-income countries are facing even stronger headwinds. They house the majority of the world’s 21m refugees and are struggling with depressed global markets and lower remittances. In this context, donors and governments must rethink how they respond to global displacement. Instead of focusing on providing refugees with short-term handouts, they must expand employment opportunities both for those fleeing their homes and for the communities that host them. Read more
By Joseph Losavio and Michael Drexler , World Economic Forum
Is 2017 the year Argentina finally turns a century of economic torpidity around? Last year’s signs were promising: Argentines swept President Mauricio Macri into office with a mandate to reform the moribund economy, attract foreign investment, and restore Argentina to its place as a Latin American leader and a global player.
But to regain its past riches, more will be needed than a reform promises. Here’s three areas that need action in 2017. It’s remarkable Argentina even needs a renaissance. Exactly 100 years ago, it was already one of the world’s wealthiest economies. Read more
In recent years Brazil has experienced significant depreciation of its nominal exchange rate. Compared with its average in 2013, the Brazilian real lost 38 per cent of its value against the US dollar in 2016. At its weakest, in January 2016, it lost as much as 47 per cent.
A year ago, we saw that depreciation as a silver lining for Brazil amid its deep recession, as a source of support for exports. But Brazil’s recent GDP data (particularly for the second quarter of 2016) show a negative contribution of net exports to growth. Read more
The global mood has shifted since Donald Trump’s surprise victory in the US presidential election. Europeans are fretful and Mexicans are panicking but many of the US investors we met in mid-November have become intensely optimistic about the prospects for their own economy. No one is quite sure whether this will benefit emerging markets or not and many Trump supporters probably don’t care. Their vote was to make America great again, not to lift up emerging or frontier economies in East Africa.
Yet US investors should still focus on economies in the East African Community (EAC), because something pretty special is brewing there. From Tanzania to Ethiopia, the region is ripe for industrialisation and growth that should easily exceed the best the US might produce in coming years. There is no doubt that US growth can accelerate in the short term but East Africa, and Kenya in particular, should grow faster. Read more
By Matthew Reed, Ovum
The number of mobile subscriptions in Africa will reach one billion by the end of 2016, according to figures from research firm Ovum. But even as the continent nears this landmark, its telecoms market is changing fast, and data and digital services rather than mobile voice and SMS will lead the next phase of development.
In the first decade of the 2000s, Africa underwent a mobile revolution as the roll-out of mobile networks across the continent brought communications technology to many for the first time. By the end of the decade, the mobile-money service M-Pesa was showing that mobile services might be able to plug some of the other gaps in Africa’s infrastructure, such as in financial services. Read more
Vladimir Putin will look back on 2016 as an annus mirabilis. Isolated and straining under the impact of western sanctions 12 months ago, the president has managed to transform Russia’s international fortunes thanks to an extraordinary run of good luck. Brexit, the migration crisis and the current surge of right-wing populism have enfeebled Europe and weakened its resolve to maintain a tough collective stance towards Russia. Putin’s military intervention in support of Bashar al-Assad has put his ally within sight of victory in the Syrian civil war. Best of all, Donald Trump is about to enter the White House on a promise to repair US-Russia relations on the Kremlin’s terms. On every front, the tide of events appears to be flowing strongly in Putin’s direction.
The new mood was apparent last month when he met Rodrigo Duterte, his counterpart in the Philippines, at the Asia-Pacific summit. Duterte used the occasion to complain about western “bullying” and declared his desire to be part of a “new order” led by Russia and China. When you consider that the remarks come from the leader of a country that has been a mainstay of the US alliance system in Asia since the early years of the Cold War, it is clear that something significant is afoot. Putin is managing to extend Russia’s diplomatic reach beyond its traditional constituency among the world’s radical and anti-American regimes. Read more
Nigeria was fortunate in the first half of this decade. Gross domestic product increased from $412bn in 2011 to $568bn in 2015 and GDP per capita more than doubled from about $1,500 to $3,100. This is made all the more impressive by the fact that the population increased by about 10 per cent in the same period.
However, this was more a function of good fortune than of dextrous macroeconomic management. Now, fortune has changed and it is hard to see how the current monetary policy effectively serves the national interest. GDP is falling, at an annualised rate of -0.6 per cent in the first quarter of 2016, -2.06 per cent in the second and -2.24 per cent in the third. Nigeria’s recession is deepening. Read more
You walk into your local pharmacy to pick up a prescription. How much of what you pay is the manufacturer’s price, and how much is mark-up grafted on by other players as the medicine moves along the supply chain? It depends where you are.
In Kenya, for example, if you buy a course of antibiotics, the price you pay, on average, is close to double the manufacturer’s wholesale price. If you buy it at your local CVS in the US, or Boots in the UK, the manufacturer’s price will be 85-90 per cent of the retail price. Thus, assuming the manufacturer sells an antibiotic for $10 globally, you may pay about $20 in Kenya, compared with $11-12 in the US or UK. Read more
When accepting his hard-earned peace prize at the Nobel ceremony in Oslo last Saturday, President Juan Manuel Santos predicted that “one of the great legacies” of Colombia’s peace process would be “a model of transitional justice that allows us to obtain maximum justice without sacrificing peace”. If only that were true.
After the prize was announced in October, the president’s negotiators had indeed worked with the Revolutionary Armed Forces of Colombia (Farc) to improve the justice provisions of the original deal, which had been narrowly defeated in a national plebiscite on October 2 due in part to concerns that Farc war criminals wouldn’t face meaningful punishment for their crimes. The new agreement that emerged in November included language that could salvage the justice provisions, with the passage of appropriate implementing legislation, and secure at least a minimal degree of justice for their victims. Read more
The consent of Russia and other non-Opec oil producers to production cuts of 558,000 barrels a day to support Opec members’ agreement on a 1.2mbd cut for the first six months of 2017 represents an important breakthrough whose strategic significance, both for the oil market and for Middle East geopolitics, should not be underestimated.
Three aspects of this agreement underlie its significance. First, it is clear that Saudi Arabia has permanently abandoned its market share-focused strategy and gone back to defending the price of oil. Second, all indications are that this agreement, in contrast to other Opec agreements in the past, will be sustained, perhaps even beyond the agreed period. And finally, the agreement may have opened an exceptional opportunity for President Vladimir Putin to further deepen Russia’s involvement in the Middle East. Read more
India is a land of extremes. Its fast-growing economy will rank beside those of China and the US as the world’s third largest by 2030. Its global diaspora is famed for its people’s prowess in business, technology and entrepreneurism.
But the country faces one serious problem that is not abating: alarmingly high rates of hunger and malnutrition. This month, a new food sustainability index produced by the Economist Intelligence Unit with the Barilla Center for Food and Nutrition shows that India continues to suffer widespread nutritional challenges that belie its status as an emerging market giant. Read more
By Nick Kochan
The election of a majority Social Democratic PSD party in Romania this past weekend gives the country a chance to push the reset button on its relations with foreign investors.
After a year when the government has been drawn into fruitless squabbles in commercial courts and arbitrations with no less than five international companies, now is the time to reassure investors that Romania is open for business. The time to close the book on introspective and opaque government is long overdue.
Energy companies have been in the forefront of these battles with Romanian officialdom. So the government took Enel, the Italian energy company, to court over a breach in a privatisation contract but ended in July 2016 facing a €1bn bill. E.on, the German energy company, won an arbitration dispute in Paris and the government was forced to pay its legal costs. Read more
By Jon Fredrik Baksaas, GSMA
There are a myriad of social and economic benefits made possible by bringing communication services to previously unconnected populations. This commitment to “Digital Inclusion” – the ability to extend connectivity to all corners of the globe – is driving internet access and usage, and providing access to vital services such as healthcare, education and commerce.
One barrier to digital inclusion is the availability of networks. To address this mobile operators have invested billions rolling out 3G/4G mobile broadband across the globe. Today mobile broadband networks cover 80 per cent of the world’s population, providing internet access to many markets where fixed access is either prohibitively expensive or non-existent. Read more